Table of Contents
1. What is inheritance?
2. How is income from inheritance regulated by law?
3. Tax rates according to law?
1. What is inheritance?
Inheritance is understood as the transfer of assets from a deceased person to a living person, the assets left behind are called inheritance.
Inheritance is divided into 02 forms:
– Inheritance by will is regulated by Article 624 of the 2015 Civil Code: “Will means an expression of the wishes of an individual, made in order to bequeath his or her property to others after his or her death.”
– Inheritance by law is regulated by Article 649 of the 2015 Civil Code: “Inheritance at law means inheritance in accordance with the order of priority of inheritance and the conditions and procedures of inheritance provided by law.”
2. How is income from inheritance regulated by law?
Based on Clause 9, Article 2 of Circular 111/2013/TT-BTC, individuals with income from inheritance of real estate in one of the following cases must pay personal income tax:
“9. Income from inheritance
Incomes from inheritance are those received by individuals under a will or in accordance with the law on inheritance, specifically as follows:
a) For inheritance as securities, including: stocks, right to buy stocks, bonds, treasury bills, fund certificates and other types of securities in accordance with the Law on Securities; shares of individuals in a joint stock company in accordance with the Law on Enterprises.
b) For inheritance is the capital portion of economic organizations, business establishments, including: contributed capital in limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises and individuals’ business establishments; capital in associations, funds are allowed to be established in accordance with the provisions of law or for entire business establishments if they are private enterprises or individuals’ business establishments.
c) For inheritance being real estate, including: land use rights; land use rights with assets attached to land; home ownership, including future houses; infrastructure and construction works on land, including future constructions; land lease rights; rights to rent water surface; other income received from inheritance is real estate in any form; subtracting income from inheritance being real estate under the instructions at Point d, Clause 1, Article 3 of this Circular.
d) For inheritance as other assets, the ownership or use right must be registered with state management agencies such as: car; mopeds, motorbikes; ships, including barges, canoes, tugboats and push ships; boats, including yachts; Airplane; hunting rifles, sports guns.”
In addition, according to Point d, Clause 1, Article 3 of Circular 111/2013/TT-BTC, income arising from inheritance is exempt from tax as follows: “d) Incomes from inheritance, gifts being real estate (including houses, future construction works in accordance with the law on real estate trading) between: wife and husband; natural father, mother with natural child; adoptive father, adoptive mother and adopted child; father-in-law, mother-in-law with daughter-in-law; father-in-law, mother-in-law and son-in-law; grandfather, grandmother with grandchildren, maternal grandfather, grandmother and grandchild; siblings together.”
Therefore, based on the above provisions, in case an individual has income arising from receiving real estate inheritance as prescribed in Clause 9, Article 2 of Circular 111/2013/TT-BTC mentioned above, he/she must pay personal income tax, except for the cases of tax exemption as prescribed in Point d, Clause 1, Article 3 of Circular 111/2013/TT-BTC.
Simultaneously, based on Clause 4, Article 4 of the Law on Personal Income Tax 2007, which stipulates tax-exempt income:
“4. Incomes from receipt of inheritances or gifts that are real estate between spouses, parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.”
According to the above regulations, income of individuals from inheritance of real estate between biological parents and biological children is exempt from personal income tax.
3. Tax rate according to the law?
When receiving inheritance that is not exempt from personal income tax, the beneficiary must pay personal income tax according to Article 16 of Circular 111/2013/TT-BTC.
“ Article 16. Bases for calculating tax on inheritance or gifts
Tax bases for incomes from inheritance or gifts are taxed income and tax rate.
1. Taxed income
Taxed income from inheritance or gifts is the value of inherited property or gifts in excess of 10 million VND each time. The value of inheritance or gift is determined in each case, specifically as follows:
a) For inheritance or gifts being securities: the value of inherited assets is the value of securities at the time of registration of ownership transfer, specifically as follows:
a.1) For securities traded on the Stock Exchange: value of securities is based on the reference price on the Stock Exchange at the time of registration of securities ownership.
a.2) For securities that do not fall into the above cases: the value of securities is based on the book value of the company issuing such securities at the latest time before the time of registration of ownership stock ownership.
b) For inheritance or gifts being contributed capital in economic organizations or business establishments: income for tax calculation is the value of contributed capital determined on the basis of book value of public company at the nearest time before the time of registration of the ownership of contributed capital.
c) For inherited property or gifts being real estate: the value of immovable property is determined as follows:
c.1) For real estate that is the value of land use rights, the value of land use right is determined based on the land price list set by the provincial People’s Committee at the time the person completes the procedure. registration of real estate use rights.
c.2) For real estate being houses and architectural works on land, the real estate value is determined according to the regulations of the competent State management agency on house value classification; regulations on capital construction standards and norms promulgated by competent State management agencies; the residual value of the house or architectural work at the time of registering for ownership.
If it cannot be determined according to the above provisions, registration fee calculation prices set by the provincial-level People’s Committees shall be based on.
d) For inheritance or gifts being other assets subject to registration of ownership or use rights with State management agencies: the value of the property is determined on the basis of the price list for calculation of registration fee due to Provincial-level People’s Committees shall stipulate at the time individuals carry out the procedures for registration of ownership and right to use inherited property or gifts.
2. Tax rate: The personal income tax rate applicable to inheritance and gifts is subject to the Full Tax Tariff at the rate of 10%.
3. Time of determination of taxed income
Time of determination of a taxed income from an inheritance or a gift is the time when an individual completes the procedures for registration of ownership or use right of an inheritance or a gift.
4. How to calculate payable tax amount
Personal income tax payable = Taxable income x Tax rate of 10%.”